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What’s Driving South Florida’s Industrial Boom?
Colliers Executive Vice President Steve Wasserman, one of the leaders of the South Florida Industrial Services team, talked to Commercial Property Executive about the trends that shaped the industrial real estate market in 2017, as well as about what to ...
Steven Wasserman, Executive Vice President, Colliers International
South Florida’s industrial market has experienced a booming 2017, with occupancy levels and rental prices returning to pre-recession rates as warehouse and distribution space is in high demandWith an influx of capital from pension funds, speculative industrial development is on the rise in Miami-Dade, Broward and Palm Beach counties.
Colliers Executive Vice President Steve Wasserman, one of the leaders of the South Florida Industrial Services team, talked to Commercial Property Executive about the trends that shaped the industrial real estate market in 2017, as well as about what to expect going forward.
South Florida’s industrial market had a booming 2017Do you expect this trend to continue in 2018?
Wasserman: South Florida’s industrial market continues to strengthen across Miami-Dade, Broward and Palm Beach counties, and vacancy rates continue to plummet hovering around 3 to 4 percent in each of the three countiesI expect this trend to continue into 2018International trade from South and Latin America continues to grow and to become more sophisticatedWe are also seeing consolidation in the industry with brick-and-mortar companies buying online retailers such as PetSmart buying Chewy.comThose acquisitions will create more demand for distribution space in 2018 and beyond.
What are the reasons behind the fact that speculative industrial development has outpaced built-to-suit construction?
Wasserman: Industrial markets throughout Florida are experiencing a return to pre-recession occupancy levels and rental rates, with almost 3 million square feet under construction in Miami-Dade CountySpeculative industrial development is on the rise in South Florida, in part because there is an influx of capital funding these projectsFollowing the recession, construction loans were mostly available for built-to-suit developmentsBut that is no longer the case.
The unlimited supply of capital from pension funds and private equity to buy large parcels of industrial land is adding a new generation of industrial space that meets today’s market needsAt the same time, we are seeing smaller companies, such as local produce companies, adapting older buildings to suit their needs.
Nearly 2 million square feet of industrial product is currently under construction across Miami-Dade CountyHow does this impact the county’s industrial market?
Wasserman: As long as there is positive absorption in the industrial market, we will not see the market become overbuiltIf the demand for products in Latin America continues at its current rate, we will be at equilibrium once the new supply is delivered.
What are landlords of older-generation industrial product doing to stay competitive?
Wasserman: We are seeing landlords renovating their industrial properties by re-roofing, redoing their parking lots, painting buildings and discounting rents.
How are the so-called “port wars” along the eastern seaboard affecting the South Florida industrial market?
Wasserman: Since PortMiami completed its expansion and dredging project, it now has the capacity to accommodate Super-Post-Panamax ships and some of the largest cargo ships traveling from the EastThe Maersk Shanghai is the largest container ship to dock at a Florida Port and marked a milestone for PortMiami.
Investments are underway at other ports to compete for the big ships, including Port Everglades in Fort LauderdaleThe increased flow of goods through post-Panamax ships will help drive demand for additional industrial real estateFor example, Miami’s geographical proximity to Latin America will fuel increased demand for industrial spaceHowever, the bigger players will most likely look at Charleston and Savannah ports because they offer development land at lower prices and are geographically positioned closer to the Northeast and Midwest.
How has demand diversified over the years—with pharmaceutical, aerospace, retail, manufacturing distributors taking over?
Wasserman: We are seeing an increase in pharma and aerospace firms, which need to be close to high-end skilled laborThe same holds true for retail manufacturingHowever, there’s been an increase in third-party logistics companies that offer distribution and fulfillment services to retailers such as Williams Sonoma, Dillard’s and TJ MaxxThey are all using these types of companies to deliver their products.
How is e-commerce impacting the supply and demand dynamics?
Wasserman: We are only in the first or second inning, so it’s too early to tellHowever, I expect e-commerce will keep demand going strong heading into 2018 as companies are strategically reconstructing their supply chains to accommodate consumer demands for faster deliveryThese shifts in consumer purchasing behavior and the rise of e-commerce have strengthened the industrial markets across the nation as proximity becomes a priority for businessesIndustrial rates continue to climb as online retailers seek out warehouse space to meet increasing demands for faster delivery.
Image courtesy of Colliers International
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